Modern Monetary Theory - How the US Government really pays for things

[trefoil]

Quote from nooby_mcnoob:

You asked the question. History will bear out the right answer. My money is on old boy networks. The FDIC is closing down *some* companies, after all.

You may be right about GS but I think the S&L crises point to the fact that no matter what, they will find a way to f*ck up big and still get bailed out. If memory serves, it was something like 200 billion the last go around. That's some serious dough.

As for involvement of the Fed. In fact, it is involved every single day of every single year. When people are withdrawing too much money, say at Christmas time, the Fed creates that money. You just don't notice it because it is not broadcast.

I wonder why they want to move to solely digital money...

The S&L thing wasn't a bailout, that was an orderly shutdown of the failed banks led by a special facility called the RTC to sell off the assets.
That should have been the template for this time around. None of the banks that failed were bailed out. Hundreds were in fact closed down. When things settled down, what was left for the RTC to do was folded into the FDIC and everything went back to normal.
All that happened was that the depositors were moved to other good banks, and the assets sold off. That's precisely what should have happened this time around.
As for the involvement of the Fed, way too much is made of that. I worked on the Fed Funds desk for quite a while. Most of the funds banks need, whether at Xmas or any other time, they get in the interbank market, when times are normal. Fed Funds is the rate banks charge each other for funds. If you have to go to the discount window to get money, that's a huge black eye for you.
That of course changed during the crisis, but I don't see that as a bad thing: the Federal Reserve is supposed to be the reserve of last resort - that's why it has that name - when there's a run. What was bad was not letting the banks that failed fail. That is the fault of one person and one person only: Paulson, who panicked, came up with the TARP, and blew the budget up for good and forever.
Conspiracy theories about the Fed put a big shmear over the actual events that actually transpired. The actual event that screwed this whole thing up was Paulson's panic, nothing else.

 

[intradaybill]

Quote from trefoil:

The actual event that screwed this whole thing up was Paulson's panic, nothing else.

Is it possible that Paulson had information not publicly disclosed and that is why he panicked?

 

[psytrade]

Quote from intradaybill:

Is it possible that Paulson had information not publicly disclosed and that is why he panicked?

off balance sheet stuff.... repo 105...

 

[ElectricSavant]

48 TRILLION dollars worth of Credit Default Swaps...you betcha...

Quote from intradaybill:

Is it possible that Paulson had information not publicly disclosed and that is why he panicked?

 

[piezoe]

Quote from trefoil:

The S&L thing wasn't a bailout, that was an orderly shutdown of the failed banks led by a special facility called the RTC to sell off the assets.
That should have been the template for this time around. None of the banks that failed were bailed out. Hundreds were in fact closed down. When things settled down, what was left for the RTC to do was folded into the FDIC and everything went back to normal.
All that happened was that the depositors were moved to other good banks, and the assets sold off. That's precisely what should have happened this time around.
As for the involvement of the Fed, way too much is made of that. I worked on the Fed Funds desk for quite a while. Most of the funds banks need, whether at Xmas or any other time, they get in the interbank market, when times are normal. Fed Funds is the rate banks charge each other for funds. If you have to go to the discount window to get money, that's a huge black eye for you.
That of course changed during the crisis, but I don't see that as a bad thing: the Federal Reserve is supposed to be the reserve of last resort - that's why it has that name - when there's a run. What was bad was not letting the banks that failed fail. That is the fault of one person and one person only: Paulson, who panicked, came up with the TARP, and blew the budget up for good and forever.
Conspiracy theories about the Fed put a big shmear over the actual events that actually transpired. The actual event that screwed this whole thing up was Paulson's panic, nothing else.

Interesting comment Re Paulson. Incidently, with regard to the FDIC, they closed UCBH in California even though Menseng (Sp?) bank in China, who owned about 10% of stock wanted to provide the capital to keep them solvent. Problem was Menseng said they needed another couple weeks to complete the transactions (seems reasonable) but FDIC was either unwilling to cooperate, or was perhaps restricted by law. Anyway the upshot was a bank that could have been saved was not, and the common share holders took a bath courtesy of FDIC. UCBH was taken over by East West Bank.

I lost some money on that deal, because I was certain that Menseng would not want to lose their investment and would step in, but i foolishly did not count on the FDIC not cooperating. I should have realized there would be problems, since Menseng was a Chinese bank.

 

[darkhorse]

Relevant

 

[jack hershey]

A practical review can be had by sitting in a movie house.

See "Inside Job"; Matt Damon narrates with questions of key players that agreed to "talk".

If you digest the movie and happened to keep notes on what happened during those years, you can see that the movie crew did NOT use the 'tells an expert trader/investor would use. The shift in "intelligence" is about two years for the speculative, front running parasitic front funning.

I remember at the peak of the problem (mid 2006) the going rate was 100K a month part time for doing white papr fixes.

 

[jack hershey]

Quote from FerdinandAlx:

The American economy seems to have found an inflation sink by maintaining a high un(der)employment rate. The idea behind the current economic policy is that by immunizing financial companies and large corporations the American economy can continue growing, but only if this means that a large portion of the population is as vulnerable as possible. The result is the exact opposite of what you're proposing as it effectively creates immunodeficiency to the economic enviroment of a large number of individuals.

Ofcourse this policy can only be extended so far and pretty soon it'll become clear that replenishing bank reserves will not lead to continued economic growth when the ability to take on debt isn't there.

I'm not very good at communicating.

The word ""immunity" ONLY applies to savvy traders who trade at all times in markets and especially those in free fall. The general, unimformed public, the power structure and the financial industry are screwed.

Jem, wjo always reads my posts so he cdan one up me as a detractor got my point and responded in his numb nuts usual way.

As the right tren line becomes asymptotic to the last phases of the inverted saucer suceeding the failing Bull retrace of this Depression, that is when the cliff the globe is jumping off occurs

In the short pattern (R2R 2B 2R) after point 3, the last leg (third)of the Depression begins.

The opposite effect re the LTL of the Bull retrace of the Depression (beginning 09MAR 09). will be happening. This graphic phenomena is called Volatility Expansion (VE).

You can examine all the market moves currently coing on. When a dominant short is in effect, VE's occur on that rractal. When a dominat long is in effect ther is a failure re the LTL of that pattern due to weakness.

So for this Depression AND after its point 3, things will get bad and NO immunity is available to the global finaincial industry nor the assorted and various governments around the world.

Expect three VE's which will successively steepen the container of the Depression.

A shift to an even haromonic form the spikey VE characterisitc will then begin to fan the RTL of the Depression about 2.3 of the way through this 10 to 12 year period beginning with point 3.

there are two classes of events in econometric analysis: newsworthy type events which form "history" and TA type events.

Immunity is not availalbe to those who are part of or create "history". History is a lagging indicator and is created as money goes to power and power affords information.

Immunity comes from the trader/investor "knowing that he knows"

For example, when you see "Inside Job" take a notebook and list names. Put a check mark by those who has a clue or "immumity".

Put an "X" by those who were history makers They ID'able by their association with money, power and NOT information of a deductive nature.)

It is neat to see the loss of integrity of a global system. I hope some of you catch on to this ongoing situation. and rhen get yourselves equipped.

 

[Misthos]

Quote from jack hershey:

It is probably a good Idea for you to create a time line in order to see how ideas came into being and the ideas did manifest practical applications to build shell after shell from a core which occurred when the US of A was formed from 13 colonies.

Fast forwarding to the Present, my belief is that all individuals need to have an "immunity" from the lack of functionality of the current multishelled system.

Political, Economic, and Societal complexity is how I view the multi-shelled system you describe. Hypercomplexity creates its own downfall. Human systems tend to revert to simplicity, and then, re-complexify.

The real-life implications of the abstraction I described above are going to be very ugly.

Because of my immunity to my environment, I get to enjoy doing anything I want.

I reached for a similar goal. But I checked out. If you have the luxury for free time - there are incredible things out there to be doing with that time.

Upcoming is the greatest period of price change ever experienced in an economy that does not require full employment.

Agreed.

Here is the thought to consider: better have personal "immunity" for what is coming down the pipe. You need information that works to solve the personal problem that indiviuals are facing due to circumstances way beyond your control. Talk is cheap.

Yes, talk is cheap, but it's also a good way to pass the time. Exercising the mind... it's that kind of hobby.

When the foxes in the chicken coop eat all the chickens, then all they have to work with is feathers, guano and anaphage.

We don't have foxes today - we have parasites created by a run away system that is too large to control. These parasites know no better than to destroy their host. They are unnatural creations, and evolution doesn't look kindly on such things. They self-destruct in the end, and are replaced by parasites that know better and set limits on themselves. (Until the next generation or so, replaces them and forgets the old lessons)

You want a real-life example of that? How did the Federal Government pass Glass Steagall? The parasites self-destructed - they couldn't fight back. History repeats. Today's parasites think they figured it out. Unfortunately, they didn't, and they have created the circumstances for an even greater "correction."

 

[jem]

Quote from darkhorse:

Relevant

very good article.